| Mon 27 Aug 2007, 12:00 | | Adh - Advtech Limited - Interim results for the si |
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ADH
ADH
Adh - Advtech Limited - Interim results for the six months ended 30 June 2007
Advtech Limited
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE code: ADH
ISIN: ZAE000031035
Interim Results for the six months ended 30 June 2007
Revenue up 15%
Operating profit up 30%
Headline earnings per share up 43%
Distribution per share up 67%
Free operating cashflow per share up 11%
Condensed Consolidated Income Statement for the six months ended 30 June 2007
Unaudited Unaudited Audited
Percentage 6 months 6 months 12 months
to to to
(R`000) Note increase 30 June 30 June 31 Dec
2007 2006 2006
Revenue 15% 475 050 413 349 830 129
Earnings before 29% 87 953 68 043 149 038
Interest, Taxation,
Depreciation and
Amortisation (EBITDA)
Operating profit 30% 71 767 55 131 122 284
Net interest received 7 204 3 171 5 539
Interest received 9 054 5 116 9 399
Finance costs (1 850) (1 945) (3 860)
Profit before taxation 35% 78 971 58 302 127 823
Taxation (23 928) (18 092) (38 545)
Profit for the period 37% 55 043 40 210 89 278
Attributable to:
Equity holders of the 53 508 38 646 86 332
parent
Minority interest 1 535 1 564 2 946
55 043 40 210 89 278
Earnings per share
Basic (cents) 37% 14.4 10.5 23.5
Diluted (cents) 40% 13.7 9.8 22.5
Headline earnings per
share
Headline earnings 2 53 434 37 200 83 526
Basic (cents) 43% 14. 4 10. 1 22.7
Diluted (cents) 46% 13.7 9.4 21.8
Number of shares in 393 665 393 665 393 665
issue (`000)
Diluted number of 389 591 393 779 382 887
shares (`000)
Weighted average 371 297 368 188 367 996
number of shares in
issue (`000)
Net asset value per 23% 90.1 73.4 83.1
share (cents)
Free operating cash 11% 46.5 42.0 40.1
flow before capex per
share (cents)
Distribution per share 67% 5.0 3.0 11.0
(cents)
Condensed Consolidated Balance Sheet as at 30 June 2007
Unaudited Unaudited Audited
(R`000) 30 June 2007 30 June 2006 31 Dec 2006
Assets
Non-current assets 451 059 437 451 438 696
Property, plant and equipment 404 222 387 643 395 859
Intangible asset 9 337 7 618 7 227
Investment - 495 200
Deferred taxation assets 37 500 41 695 35 410
Current assets 236 512 175 010 90 327
Trade and other receivables 59 164 53 785 30 865
Cash and cash equivalents 177 348 121 225 59 462
Total assets 687 571 612 461 529 023
Equity and liabilities
Equity 357 793 290 422 328 628
Attributable to equity holders of 354 876 288 858 327 246
the parent
Minority interest 2 917 1 564 1 382
Non-current interest bearing 7 956 18 322 11 000
liabilities
Current liabilities 321 822 303 717 189 395
Trade and other payables 128 254 119 422 135 013
Taxation 11 329 27 315 6 968
Fees received in advance 182 239 156 980 47 414
Total equity and liabilities 687 571 612 461 529 023
Supplementary Information for the six months ended 30 June 2007
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R`000) 30 June 2007 30 June 2006 31 Dec 2006
Capital expenditure - current 24 063 41 958 65 497
period
Capital commitments - remainder 44 290 56 768 -
of the year
- future years - - 131 694
Operating lease commitments in 119 795 124 439 150 563
cash - future years
Condensed Consolidated statement of changes in equity for the six months ended
30 June 2007
Shares
held by
Ordinary Share Share
share Share option Incentive
(R`000) capital premium reserve Trust
Balance at 1 January 2006 3 937 338 771 1 687 (8 863)
Share-based payment expense 1 586
Profit for the year
Minority interest
distribution
Share options exercised 3 275
Total recognised income and - - 1 586 3 275
expense for the year
Shares purchased by the (11 912)
Share Incentive Trust
Capital distribution to (37 576)
shareholders
Balance at 31 December 2006 3 937 301 195 3 273 (17 500)
Share-based payment expense 991
Profit for the period
Share options exercised 1 949
Total recognised income and - - 991 1 949
expense for the period
Capital distribution to (28 818)
shareholders
Balance at 30 June 2007 3 937 272 377 4 264 (15 551)
Attributable
Retained to equity
earnings/ holders
(accumulated of the Minority Total
(R`000) loss) parent interest equity
Balance at 1 January (49 991) 285 541 1 357 286 898
2006
Share-based payment 1 586 1 586
expense
Profit for the year 86 332 86 332 2 946 89 278
Minority interest - (2 921) (2 921)
distribution
Share options 3 275 3 275
exercised
Total recognised
income and expense
for the year
86 332 91 193 25 91 218
Shares purchased by (11 912) (11 912)
the Share Incentive
Trust
Capital distribution (37 576) (37 576)
to shareholders
Balance at 31 36 341 327 246 1 382 328 628
December 2006
Share-based payment 991 991
expense
Profit for the period 53 508 53 508 1 535 55 043
Share options 1 949 1 949
exercised
Total recognised 53 508 56 448 1 535 57 983
income and expense
for the period
Capital distribution (28 818) (28 818)
to shareholders
Balance at 30 June 89 849 354 876 2 917 357 793
2007
Condensed Segmental Report for the six months ended 30 June 2007
Unaudited Unaudited Audited
Percentage 6 months to 6 months to 12 months to
(R`000) increase 30 June 2007 30 June 2006 31 Dec 2006
Revenue 15% 475 050 413 349 830 129
Education 15% 407 182 354 227 710 961
Resourcing 15% 67 868 59 122 119 168
Operating profit 30% 71 767 55 131 122 284
ducation 28% 75 051 58 833 130 244
esourcing 31% 13 966 10 678 20 393
entral 20% (16 601) (13 879) (27 294)
administration
itigation 30% (649) (501) (1 059)
expenses
Condensed consolidated cash flow statement for the six months ended 30 June
2007
Unaudited Unaudited Audited
Percentage 6 months 6 months 12
to to months
to
(R`000) Note increase 30 June 30 June 31 Dec
2007 2006 2006
Cash generated by 3 89 240 67 188 148 188
operations
Generated by decrease in 100 316 101 963 32 040
working capital
Cash generated by 189 556 169 151 180 228
operating activities
Net interest received 7 204 3 171 5 539
Taxation paid (21 657) (12 253) (46 767)
Capital distribution (28 818) (25 768) (37 576)
Net cash inflow from 146 285 134 301 101 424
operating activities
Net cash outflow from (24 401) (52 833) (72 860)
investing activities
Net cash (outflow)/inflow (3 973) 3 796 (5 053)
from financing activities
Net increase in cash and 117 911 85 264 23 511
cash equivalents
Cash and cash equivalents 59 462 35 969 35 969
at beginning of the
period
Net foreign exchange (25) (8) (18)
differences on cash and
cash equivalents
Cash and cash equivalents 177 348 121 225 59 462
at end of the period
Free operating cashflow
before capex per share
(cents)
Net operating profit
after taxation 55 043 40 210 89 278
Adjust for non-cash IFRS 1 263 1 172 2 154
and lease adjustments
(after taxation)
Net operating profit
after taxation
-adjusted for non-cash 56 306 41 382 91 432
IFRS and lease
adjustments
Other non-cashflow income (74) (1 446) (2 806)
statement items (after
taxation)
Plus: depreciation and 16 187 12 912 27 001
amortisation
Operating cash flow after 37% 72 419 52 848 115 627
taxation
Plus: working capital 100 316 101 963 32 040
changes
Free operating cash flow 172 735 154 811 147 667
before capex
Weighted average number 371 297 368 188 367 996
of shares in issue (`000)
Free operating cash flow 11% 46.5 42.0 40.1
before capex per share
(cents)
Notes to the financial statements for the six months ended 30 June 2007
1. Significant accounting policies
1.1 Statement of compliance
The financial statements have been prepared using accounting policies
that comply with International Financial Reporting Standards and are
presented in accordance with IAS 34 ("Interim Financial Reporting").
The accounting policies and methods of computation are consistent with
those applied in the previous year.
1.2 Adoption of new Standards
IFRS 7, Financial Instruments: Disclosures ("IFRS 7") was adopted with
effect from 1 January 2007.
The adoption of this standard had no effect on the financial results and
financial position of the Group.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R`000) 30 June 2007 30 June 2006 31 Dec 2006
2. Determination of headline
earnings
Earnings attributable to 53 508 38 646 86 332
equity holders of the parent
per the income statement
Items excluded from headline (74) (1 446) (2 806)
earnings
Loss on disposal of 18 - 295
investment
Profit on disposal of assets (130) (2 036) (4 357)
and businesses
(112) (2 036) (4 062)
Taxation applicable thereto 38 590 1 256
Headline earnings 53 434 37 200 83 526
3. Notes to the cash flow
statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R`000) 30 June 2007 30 June 2006 31 Dec 2006
Reconciliation of profit 78 971 58 302 127 823
before taxation to cash
generated by operations
Profit before taxation
Adjust for non-cash IFRS and 1 373 1 173 2 386
lease adjustments (before
taxation)
80 344 59 475 130 209
Add back: 8 896 7 713 17 979
Depreciation and 16 187 12 912 27 001
amortisation
Net interest received (7 204) (3 171) (5 539)
Other non-cashflow income (87) (2 028) (3 483)
statement items
Cash generated by operations 89 240 67 188 148 188
Directors` comments on results
Overview
The directors are pleased to report another solid academic and operational
performance for the six months ended 30 June 2007.
On the academic front, a highlight was the registration of the Independent
Institute of Education ("IIE") as a private higher education provider, which
consolidated all of the Group`s existing registrations into the Institute. The
completion of the evaluation phase of the IIE`s first academic quality audit
by the audit directorate in the Higher Education Quality Committee of the
Council for Higher Education of South Africa was another milestone. These
developments underline the Group`s commitment to academic quality and its
growing role as a leader in education in the country.
The Board is of the view that sustainable financial success flows from
ensuring a robust and sustainable academic and business model. Over the years
the Group has invested heavily in academic resources, infrastructural capacity
and academic material, and has included in the results announcement posted to
shareholders an overview of the Group`s sound and compliant academic
governance structures. ADvTECH will continue to invest in these areas so as to
broaden access to education, training and employment with concomitant growth
in enrolments and career placements.
Profit for the period increased by 37% from R40,2 million to R55,0 million,
yielding increases of 43% in headline earnings per share from 10.1 cents to
14.4 cents per share and of 67% in distributions from 3.0 cents to 5.0 cents
per share. These headline figures are underpinned by continued real growth,
strong cash flow and a sound balance sheet and reflect the robustness of the
Group`s business model and its inherent capacity for growth.
Education
The Education division is a leader in the independent education sector and
operates under the overarching academic leadership of the Independent
Institute of Education. It includes the well-known brands Abbotts College,
CrawfordSchoolsTrade Mark, College Campus, Junior College, Rosebank College,
Varsity College, Vega - The Brand Communications School, and the adult
education and skills unit, Imfundo, which incorporates CCI.
The Education division increased revenues by 15% to R407,2 million and
operating profit by 28% to R75,1 million. During the comparable period in 2006
operating profit of R58,8 million included termination costs arising from the
Crawford Glenmore closure of R5,5 million. The operating margin improved from
17% to 18% for the period under review, illustrating the value of focusing and
growing the Group`s already successful operations.
Resourcing
The Resourcing division`s activities include recruitment, placement, temporary
staffing, response handling and HR contracting. The portfolio includes the
brands Brent Personnel, Cassel & Company, Communicate Personnel, Insource.ICT,
Inkokheli Appointments, Network Recruitment, Pro-Rec Recruitment and Vertex-
Kapele.
Revenue for the six months increased by 15% to R67,9 million and operating
profit by 31% to R14,0 million. However, during the comparable period in 2006,
the division included revenue of R6,5 million and operating profit of R0,6
million from the subsequently sold bookshop business, with the effect that the
growth in the recruitment business` revenue and operating profit was 29% and
39% respectively.
Demand for skilled staff remains high especially in the key focus areas of IT,
finance and engineering, and the Group, which has developed a professional and
trustworthy reputation, continues to gain market share.
Central Administration and Litigation
The increase of 20% in central administration costs to R16,6 million reflects
the continuing effect of the additional infrastructure and resources put in
place in the second half of 2006 to accommodate the rapid growth of the Group.
The rate of increase for the full year is expected to be appreciably lower.
Litigation expenses applicable to the Group`s damages claims against the
Welihockyjs were R0,6 million for the period (2006 - R0,5 million). The matter
has now entered the discovery phase of trial and, despite continuing delaying
tactics on behalf of the Welihockyjs, progress continues to be made. The Board
Litigation Committee remains satisfied with the merits of the claims and that
the Group has no exposure other than for ongoing legal costs which are
expensed as incurred.
Balance Sheet and Cash Flow
The Balance Sheet has continued to strengthen as a result of the strong
profitability and cash flow performance. Free cash flow generated before capex
remains strong at 46.5 cents per share (2006 - 42.0 cents) although the rate
of improvement has slowed as working capital improvements are nearing desired
targets.
Cash generated by operating activities of R189,6 million (2006 - R169,2
million) enabled the Group to fund capital expenditure of R24,1 million (2006
- R42,0 million) and pay a capital distribution of R28,8 million (2006 - R25,8
million) from its own resources. Part of this cash flow accumulation is
seasonal and, given the nature of the Group`s business model and investment
plans, a portion of the cash resources will be utilised during the second half
of the year. It is expected that the Group will remain ungeared at year end.
Capital Distribution
The Board has resolved to declare an interim capital distribution out of share
premium of 5.0 cents per share (2006 - 3.0 cents) in respect of the period
ended 30 June 2007. The authority to make this payment to shareholders was
obtained at the annual general meeting held on 22 May 2007.
Set out in the table below are the pro forma financial effects of the
distribution on the Group`s earnings per share, headline earnings per share,
net asset value per share and net tangible asset value per share based on the
Group`s unaudited financial results as at and for the period ended 30 June
2007. The pro forma financial effects have been prepared for illustrative
effects only and, because of their nature, they may not give a true reflection
of the Group`s financial position or results. The pro forma financial effects
are the responsibility of the Company`s directors.
Before the After the Percentage
distribution distribution change
1 2 & 3
Earnings per share (cents) 14,4 14.3 (1%)
Headline earnings per share 14,4 14.2 (1%)
(cents)
Weighted average number of 371 297 371 297
shares in issue (`000)
Net asset value per share 90.1 85.4 (5%)
(cents)
Net tangible asset value per 87.8 83.0 (5%)
share (cents)
Number of shares in issue 393 665 393 665
(`000)
Notes:
1. Extracted from the unaudited financial results for the period ended 30 June
2007.
2. The earnings and headline earnings per share figures in the "After the
distribution" column have been based on the following assumptions:
- the distribution was made on 1 January 2007; and
- interest, at an average before tax rate of 8.8% per annum, was forfeited on
the cash distributed.
3. The net asset value and net tangible asset value per share figures in the
"After the distribution" column have been based on the assumption that the
distribution was made on 30 June 2007.
Set out in the table below are the salient dates and times applicable to the
distribution:
2007
Last day to trade in order to participate Friday, 14 September
in the distribution on
Trading commences ex-distribution on Monday, 17 September
Record date on Friday, 21 September
Payment date on Tuesday, 25 September
Share certificates may not be dematerialised or rematerialised between Monday,
17 September 2007 and Friday, 21 September 2007, both days inclusive.
Directorate
On 24 August 2007 Mr ER Shipalana and Dr FJ Coughlan were appointed as
executive director and alternate director respectively.
Prospects
The primary drivers of the success of ADvTECH lie in the quality academic and
job placement experiences provided to the thousands of students and job
candidates who choose to advance their careers with one of our ADvTECH brands.
The continued significant increase in enrolments and placements are testament
to this success and a major indicator of future sustainability and growth.
Accordingly, in the absence of any material change in economic conditions, the
Group expects to deliver improved results and cash flow for the full year.
Michael SACKS Frank THOMPSON
Chairman Chief Executive Officer
Johannesburg
24 August 2007
Directors: MI Sacks* (Chairman), FR Thompson (CEO), JDR Oesch (Financial), JNP
Booyens, BD Buckham*, JJ Deeb, CN Duff, DK Ferreira*, DL Honey, JD Jansen*, HR
Levin*, ER Shipalana, F Titi* *Non Executive
Alternate Directors: A Isaakidis, FJ Coughlan Group Company Secretary: SC
O`Connor
Registered office: ADvTECH House, Inanda Greens, 54 Wierda Road West, Wierda
Valley, Sandton
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, 11 Diagonal
Street, Johannesburg 2001
Sponsor: Bridge Capital Services (Pty) Ltd
Date: 27/08/2007 12:00:01 Produced by the JSE SENS Department.
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